Chapter 11 Insolvency Rules

Insolvency experts and turnaround specialists are gearing up for a surge in corporate debt problems which they expect will generate the biggest wave of company restructurings in decades. In spite of the tightening credit crunch, banks have largely held off calling in loans, focusing instead on dealing with write-offs from the subprime crisis. But they have been looking through their books to identify businesses in danger of breaching their loan covenants, and unless credit conditions improve in the next few months, these companies may well find themselves vulnerable to the banks' desire to balance their books.

With the potential for a serious downturn questions are being asked as to whether European insolvency regimes are in a position to deal with the consequences.

Capital structures have become very much more complex and the current Enterprise Act does not allow for a venue to conduct a valuation fight. Nor does it provide for a stay or freezing of past debts to allow a company breathing room to prepare a turnaround plan or address core issues.

It is these aspects of the current system that prompted David Cameron to raise the issue at the CBI employers' group recently.